The investment in a new product requires a capital expenditure of € 45,000.-. The economic life time is five years. The annual fixed operational payments are € 95,000.-. The proportional cash outs per unit amounts to € 200.-. The internal interest rate (= WACC) is 10% and the number of selling units are 300/year. What is the minimum sales price/unit (x), which ensures the required profitability of the investment? Use a) the NPV method b) the annuity method!
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- Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?An investment project is expected to yield $10,000 in annual revenues, will incur $2,000 in fixed costs per year, and requires an initial investment of $5,000. Given a cost of goods sold of 60% of sales and ignoring taxes, what is the payback period in years? * A. 2.50 B. 2.00 C. 5.00 D. 1.25Based on thesame background example (BACKGROUNDThe company ABC, L. C. manufactures someproducts with an average sales price of € 25/unit,with fixed annual costs of € 110,000. The averageunit variable costs are € 5) An investment requires an initial disbursement of € 2,500,000 and the duration of the project is 3 years, in the first of which it generates a cash flow of € 1,500,000, in the second € 3,700,000 and the third € 4,100,000. Calculate the Net Present Value of the investment, knowing that inflation is 3% cumulative annually and that the required profitability in the absence of inflation is 8%. Calculate the actual internal rate of return of the previous investment.
- Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th year and Ghc53400 for the 7th year. a. Find the Net Present Value (NPV) b. Determine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate ofGiven the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6 year and Ghe53400 for the 7th year. a. Find the Net Present Value (NPV) b. Detemine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate of return as investment criteriaAn operation manager expects that the new machine will generate the following streams of income: Year 1- Ᵽ 13, 240.25; Year 2 - Ᵽ 15, 780; Year 3 - Ᵽ18, 990.95; Year 4 - Ᵽ21, 500.50; Year 5 - Ᵽ25,000.00. What is the present value of these future payments if the assumed interest rate is 3.7% ? If a new technology can reduce the future cost of production in 6 years at the following rate: Ᵽ8,550, Ᵽ10,200, Ᵽ13,600, Ᵽ 15,000, Ᵽ12,500, Ᵽ9000 what is present value of the future cost of production assuming that the interest is 6.33%? If the cost of the new technology in Item No. 2 is Ᵽ 52,435.60, what is the net present value? Should you buy or not the new technology?
- The net present value of an investment is the present value of the expected cash flow minus the initial investment. The company's managers hf. require a 9% return (required rate of return). The managers are considering buying a device that costs ISK 210,000. The device will create a cash flow of ISK 84,000. during the next three years, at the end of each year. What is the net present value of this investment (net present value of investment)? Group of answer choices a. ISK 21,261 b. ISK 212,604 c. ISK 2,629 d. 42,000 ISKYou are examining a new project. You expect to sell 7,000 units per year at €60 net cash flow apiece for the next 10 years. The relevant discount rate is 16 per cent, and the initial investment required is €1,800,000. a. What is the base-case NPV? b. After the first year, the project can be dismantled and sold for €1,400,000. If expected sales are revised based on the first year’s performance, when would it make sense to abandon the investment? In other words, at what level of expected sales would it make sense to abandon the project? c. Explain how the €1,400,000 abandonment value can be viewed as the opportunity cost of keeping the project in one yeara. Calculate the following Periodic Total Returns on a 5-year investment. To your calculations, assume that you have selling costs of 5% Year NCF (€) Market Value (€) Total Return 95,000 95,000 1. 10,000 98,000 5,000 100,000 8,000 101,000 4 12,000 103,000 135,000 117,000 b. If the quarterly Income Return is 2.2% and the Quarterly Capital Return is 0.4%, calculate the Annual Total Return of the investment 2. 3.
- An investment has an installed cost of $527,630. The cash flows over the four-year life of the investment are projected to be $212,200, $243,800, $203,500 and $167,410, respectively. If the discount rate is 10%, at what discount rate is the NPV just equal to 0? (Input in percentage, keep 2 decimals. e.g. if you got 0.10231, input 10.23) Question 10 The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up". As a result, the cemetery project will provide a net cash inflow of $145,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4% per year forever. The project requires an initial investment of $1,900,000. The company is somewhat unsure about the assumption of a growth rate of 4% in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11% on investment? (Input in percentage, keep 2 decimals. e.g. if you got…3. A production machine purchase amounts to 800000€ . Its economic lifetime is 10 years. Residual value has been estimated to be 70000€ . The investment would yield 230000€ extra revenue per year and the annual running costs are 120000€ . The company's profit demand for this type of investment is 12% and it allows maximum five years' payback time for its investments. Calculate the profitability of the investment with the following methods: a) Net Present Value method b) Annuity method c) Internal rate of interest method d) Payback methodAn investment of $40,000 today is expected to give rise to annual contribution of $25,000. This is based on selling one product, a volume of 10,000 units, selling price of $12.50 and variable cost of $10. Annual fixed cost of $10,000 will be incurred for the next four years; the discount rate is 10%.Required:(a) Calculate the NPV of this investment.(b) Calculate the sensitivity of your calculation to the following:i. Initial investmentii. Selling price per unitiii. Variable cost per unitiv. Sales volumev. Fixed costsvi. Discount rate